Regional Development in Ukraine: Priority Actions in Terms of Decentralization This file note was written by Dr Tomila Lankina (LSE Department of International Relations), Dr Claire Gordon (LSE Teaching and Learning Centre) and Professor Svitlana Slava (Uzhhorod National University, Department of Economics and Business). It does not represent the official views of the Committee of the Regions. More information on the European Union and the Committee of the Regions is available online at http://www.europa.eu and http://www.cor.europa.eu respectively. Catalogue number: QG-04-17-059-EN-N ISBN: 978-92-895-0910-7 doi:10.2863/872975 © European Union, 2017 Partial reproduction is permitted, provided that the source is explicitly mentioned Table of Contents List of Abbreviations Executive Summary .............................................................................................. 1 I. Introduction: Scope, Objectives and Methodology ..................................... 3 II. Presentation and Analysis of State of Play: Overview ................................ 5 III. Analysis of emerging trends: Bottlenecks and priority actions ................. 10 IV. Case studies to illustrate key success factors to be considered in future cooperation projects .................................................................................. 20 V. Recommendations ...................................................................................... 28 References ........................................................................................................... 36 Supplementary Appendix .................................................................................... 40 List of Abbreviations AA Association Agreement ACU Association of Cities in Ukraine ANGO Association of NGOs COE Council of Europe DCFTA Deep and Comprehensive Free Trade Agreement DESPRO Swiss-Ukrainian Decentralization Support Project EGTC European Grouping of Territorial Cooperation EP Eastern Partnership EU European Union ENP European Neighborhood Policy GIZ German Corporation for International Cooperation GMBH IOM International Organization for Migration IMC Inter-municipal cooperation IRI International Republican Institute LG Local government NANU National Academy of Sciences of Ukraine NGO Non-governmental organization PIT Personal income tax ProZorro Public e-procurement system SME Small and medium enterprises UAH Ukrainian Hryvnya UM United municipalities UNDP United Nations Development Program USAID United States Agency for International Development UTF Ukraine Task Force ZRCSEHR Zakarpattya Regional Centre for Social, Economic and Humanitarian Research Executive Summary This report explores the processes of decentralization and reform of local government currently underway in Ukraine. After a brief introduction in Part 1 laying out the objectives of the study and the scope of the work Part 2 presents an overview of the state of play of recent reforms highlighting key dimensions of the reform as well as the wider political-institutional context which is shaping the process of reform implementation. In Part 3 emerging trends with a more detailed exploration of the ongoing reforms and of current priorities and bottlenecks are explored. Key issues that are highlighted are issues that emerged in the process of amalgamating municipalities and continuing lack of clarity in terms of the distribution of power between different layers of government, the risk of recentralization at the rayon level impeding the process of decentralization concerning the newly amalgamated municipalities and continuing low levels of citizen trust and perception of efficacy. Part IV contains a series of short case studies illustrating key success factors which need to be considered in future cooperation projects. It is evident that given their shared transition legacies examples of good practice from Central European countries are seen to be most relevant to local and regional government actors in Ukraine. The final part of the report presents a series of recommendations for local and regional authorities, the national level and the Committee of the Regions to consider to further the decentralization and democratization of local government in Ukraine. These include recommendations to enhance transparency, to ensure greater clarity in intergovernmental relations as a means to safeguard local authorities against excessive centralization, and to foster cooperation with other Ukrainian municipalities and with external partners. 1 I. Introduction: Scope, Objectives and Methodology Decentralization and reforms of local government have featured prominently in Ukraine’s agenda of political and economic transformation. They are also an important component of Ukraine’s participation in EP and ENP. As part of the ongoing reform process, Ukraine has recently adopted and began to implement a series of radical changes to the institutional set-up of municipal bodies; their administrative boundaries; and relations with other state, regional and local bodies. Among the most important aspects of the reform is voluntary amalgamation of municipalities to form larger units (United Municipalities, UM) with a minimum recommended population threshold of 5,000 people. These reforms are aimed at enhancing the capacity of local authorities to perform complex policy making and service delivery functions, notably in healthcare and education; to devise long-term economic development plans; and to enhance revenue-generating capacities of local bodies (Roberts et al. 2014; Sasse 2016). Pursuant to the act of the Ukrainian Parliament passed on 14 July 2015 (№ 595- VIII, art. 86.2) a new law governing local elections was put into place, among other measures raising the electoral threshold for parties running for local councils to 5% of the total vote (For a list of key legal acts pertaining to the latest round of decentralization reforms, see SA5). The aim of this study is to provide an overview of both the wider political- institutional context that has a bearing on the successes and challenges of reform implementation; and of how local practitioners themselves see the reform process and the main obstacles to effective reform implementation. The study is based on insights from published academic evidence-based studies about aspects of local governance in Ukraine; and on interviews with local practitioners that were conducted specifically for this study. While the academic studies aim to provide objective assessments of concrete reforms and policies and their impacts, the material derived from interviews represents subjective assessments of local practitioners. The academic studies and interviews are supplemented with examples of best practice cases published by donor agencies. As part of the research for this project, Ukraine-based experts in local government and decentralization conducted focus groups and interviews with key stakeholders across Ukraine in November 2016. The survey was organized with the aim of ascertaining the views of two groups of respondents: (1) representatives of oblast, rayon and local authorities; and (2) external experts in organizations that deal with decentralization or local government and municipalities’ international activities. The structure of the research sample is shown in Tables 1.1 and 1.2 of the Supplementary Appendix (SA1). The sample consists of 25 respondents. 3 The first group of interviewees included 13 respondents covering the oblast (regional), rayon and local levels. Specifically, respondents included 3 high-level managers; 1 rayon-level official; 7 city-level officials, including 3 mayors; and 2 representatives of village councils. Thus, the sample covers staff at different administrative levels. Among these interviewees are 3 CORLEAP and TISZA EGTC members. Geographically the respondents represent 6 different oblasts: Kyiv (2 respondents); Khmelnytsky (1); Poltava (1); Rivne (2); Odessa (1); and Zakarpattia (6). The average term of respondents’ employment is roughly 4.5 years; 4 persons have been in their positions for more than 10 years; 1 person has worked for 6 years; 1— for 2 years; and 7 persons have been in their positions for just 1 year. This distribution reflects current patterns of tenure, whereby municipalities have many newly elected officials following the 2015 local elections. In our sample there are 7 elected representatives. The second group of respondents consists of 12 experts from various relevant organizations. Specifically, 1 interviewee is from the COE’s Office in Ukraine; 2 respondents are from the newly created (2016) group, the TISZA Limited Liability European Grouping of Territorial Cooperation; 3 persons represent the associations of authorities of different levels (Association of Cities in Ukraine; Association of Rural and Village Councils of Ukraine); 3 are focused on reforms of self-governance (Association for Development and Reform of Cities, Towns and Villages; Association for Community Self-organization Assistance); 2 are from the educational resources centers (West-Ukrainian Regional Educational Centre; Resource Centre АNGО); and 1 is from the Institute for International Politics. Geographically they represent 6 different oblasts: Kyiv (3 respondents); Cherkasy (1); Lviv (2); Chernivtsi (1); Odessa (1); and Zakarpattia (4). The average term of these respondents’ employment is approximately 5 years; 2 interviewees have been employed for between 11 and 20 years; 6 –between 2 to 10 years; 4 for up to 1 year. (Details are in the SA1